Vendors to feel the Project New squeeze

Telstra's outsourcing partners have been put on notice today as Project New looks to trim the fat from the edges of the telco giant, with the head of the program today telling investors that the end game was to slash one third of the company's vendors from the roster.

Telstra's outsourcing partners have been put on notice today as Project New looks to trim the fat from the edges of the telco giant, with the head of the program today telling investors that the end game was to slash one third of the company's vendors from the roster.

Telstra's Project New progress so far.(Credit: Telstra)

Project New was announced at last year's investor day, and sought to simplify Telstra's business processes to better serve customers and save costs. The project seems to be delivering so far, with Telstra group managing director Robert Nason announcing today that the project is about halfway complete, and has given the company a $622 million productivity boost in financial year 2011.

Nason told analysts today that they are "16 months in ... we're probably slightly ahead of where we thought we'd be". He added that the project is set to accelerate rapidly over the next 12 months.

"We're about 50 per cent of the way through in my view, in terms of implementing the changes we anticipated to make in the company. Implementation itself is accelerating. As an example of that, I'm told October was the biggest month in terms of customer service reform we've ever had with around 45 different programs going in to place to better serve the customer," he revealed.

As a result of the cost savings and business streamlining operations implemented under Project New, Telstra has experienced a 50 per cent year-on-year reduction in complaints lodged with the Telecommunications Industry Ombudsman, a 6 per cent increase year on year of customer service calls resolved upon first contact, as well as a 28 per cent decrease in monthly call volumes (down from approximately 2.1 million per month last year). The company also changed the reporting lines of around 25,000 staff to improve efficiency over the last 12 months.

Nason added that while the cost cutting and streamlining measures had worked wonders for Telstra, Project New hadn't all been a bed of streamlined roses.

"I don't want to pretend we got it all right the first time around; we didn't," he admitted to analysts.

"When you've got such a big program and you've done so much restructuring and changes to the operating model, it's natural that you should go back and have a look; and that will be part of the second wave [of productivity improvement]."

Part of the cost cutting and efficiency measures will be eliminating vendor relationships that represent a dead weight on the business.

"We've looked at our external vendors, and that's quite a big component of both the service improvement and the productivity changes we're looking at. Over the last 12 months, we've reduced our total number of vendors that service Telstra by 19 per cent. We anticipate that by the time the project is completed, we will [have reduced the number of] vendors by about 33 per cent, so we are looking at deeper, more productive, more value-added relationships with fewer suppliers to drive competitive value for us in the marketplace.

"We're systematically working through our supplier base, and we've addressed most of the top 50 suppliers and now we're going through the next layer and the next layer and progressively working through that in each area of the business," Nason said.

At the same time that the company is going through its vendor relationships, it is also continuing its cultural change process for frontline and back-of-house staff. Part of that cultural change will be overhauling the way in which the retail staff serves customers.

"We're planning to reintroduce process ownership back into the company, as well as the continuous improvement approach, so every issue that a customer has with a process, everything an employee identifies that isn't working with a process, will have a channel to get that repaired on an ongoing basis.

"At the moment, I would say we've largely repaired the biggest issue we have in process, but there are still many smaller issues that are routine areas that our front-of-house staff get annoyed with ... where they take too long to service a customer, take too long to activate a mobile — [issues] that we have to hone and get right," he said.

Nason added that with the process ownership, changes will bring new ways to measure customer satisfaction at a retail store level.

He said that they are looking at introducing a "net promoter score" and a net promoter system, which measure how many customers advocate your services, how many are passive and how many are considered detractors (even if they do use your products and services). It is expected to be implemented across the company, and will be used to evaluate the performance of every Telstra Shop and every Telstra depot.

The customer advocacy measurements are set to kick off early in the 2012 calendar year, with the first results rolling in around mid-year, Nason added.